Clark v. Brooks

Brooks, a mother of two minor children, filed for Chapter 13 bankruptcy. Brooks reported her monthly wages of $6214.50 and her $400.00 monthly child support payments from her ex-husband; claimed applicable standardized deductions for living expenses for a household of three people; and deducted her $400.00 monthly child support payments in response to an instruction to “[e]nter the monthly average of any child support payments … for a dependent child … that you received in accordance with applicable nonbankruptcy law, to the extent reasonably necessary to be expended for such child,” 11 U.S.C. 1325(b)(2). Brooks’s monthly disposable income was reduced to $111.46. Brooks deducted another $141.00 for day care, which left her with negative disposable income. Brooks submitted a plan, proposing to pay $100.00 per month for 60 months, which would have resulted in no distribution to unsecured creditors; substantially all payments would have gone to other arrearages, and trustee’s and attorney’s fees. The bankruptcy court concluded that Brooks’s child support payments were fully excludable from disposable income; although a double deduction would be theoretically possible, Congress’s desire to preserve child support payments for their intended beneficiaries prevailed over that risk and the “reasonably necessary” qualification functions as an independent backstop. The district court and Seventh Circuit affirmed. View "Clark v. Brooks" on Justia Law